Oil Market Monthly Report - KAMCO Investment Company
KAMCO Research Oil Market Monthly Report
February - 2017
Production cut keeps oil prices steady...
In this Report... Oil Prices ……………....….
2
Oil Demand .………………
3
Oil Supply ………….….…..
4
Reserve & Capacity …...
5
Oil Price Forecast ………
6
Oil prices remained elevated since the start of the year on the back of better than expected compliance to the agreed production cuts by OPEC and non-OPEC producers. According to the IEA, compliance by OPEC producers stood at 90% as larger-than-agreed cuts by Saudi Arabia was partially offset by higher production from Libya and Nigeria, which are exempt from the agreement. The production rate by OPEC during the month stood at 32.3 mb/d, lowest level in 14-months, according to Bloomberg, whereas OPEC’s monthly report puts the number at 32.139 mb/d, according to secondary sources. In the non-OPEC camp, the cuts were estimated to have reached 269 tb/d during January-17 as compared to levels seen during the last quarter of 2016 for the eleven producers that have agreed to slash productions, including Russia and Kazakhstan. This is almost 50% of the agreed upon cuts of around 558 tb/d for the non-OPEC producers. Meanwhile, the optimism related to lower output was almost balanced by rising oil output in the US as seen from the rising rig count. According to Baker Hughes, US oil companies added the highest number of rigs since 2012 over the past four weeks with an increase of more than 60 rigs taking the total count to 591 active rigs. This is also the highest rig count since October-15 as drillers added rigs in 14 out of 15 weeks. According to Reuters data, oil production in the US has increased by almost 528 tb/d since the last quarter of 2016 as oil firms pumped more oil to take the advantage of higher prices. On the other hand, demand side factors are also said to have been positive over the last quarter of 2016, especially in Europe due to colder weather conditions. For 2017, oil demand is expected to benefit from higher consumption in China and other non-OECD countries coupled with expectations of higher economic growth led demand in Europe. Both IEA and the OPEC monthly reports have pointed at higher oil demand during 2017 with IEA predicting a demand growth of 1.4 mb/d (an increase of 0.1 mb/d as compared to its previous forecast) and OPEC expecting a slightly lower demand growth of 1.2 mb/d (up 35 tb/d from its previous forecast). One of the key markets for oil, India, is expected to remain strong in the long run, however, we believe that the recent policy initiatives have affected demand during the last quarter of 2016 that spilled over to 2017. According to the country’s Oil Ministry, India’s monthly oil demand declined the most since May-03 with fuel consumption down 4.5% during January-17. The opposing forces of positive demand and higher supply resulted in oil trading within a very tight range during the month. Average OPEC crude price during January-17 stood at USD 52.4/b, a marginal increase of 1.4% as compared to the previous month. Brent crude and Kuwait crude also traded higher as compared to the previous month with average prices up by 1.1% and 1.9%, respectively. KAMCO Research expects oil price to remain range bound in the near term until the production cuts remain in effect. Beyond June-17, we expect additional pressure on prices as producers emerge from the temporary cuts. USD/b 57.0
OPEC
Kuwait
Mn b/d 97.5
Brent
World Oil Demand - 2016/2017, mb/d
96.5
56.0
95.6
94.5
54.0
93.6
93.7
Q1-16
Q2-16
96.8
Q3-17
Q4-17
95.6
95.5
55.0
96.8
94.8
94.9
Q1-17
Q2-17
93.5
53.0
92.5
52.0
91.5
51.0
90.5 89.5
50.0
88.5
Head - Investment Research +(965) 2233 6907 [email protected]
10.0
Non-OPEC Oil Supply - 2016/2017, mb/d 57.9
57.8
57.8 57.6
10.0 57.5
57.3 57.0
57.0
6.0
2.0
Assistant Vice President +(965) 2233 6912
Q4-16
8.0
4.0
Junaid Ansari
Mn b/d 58.0
OPEC Members Oil Production - Jan-17
Mn b/d 12.0
Faisal Hasan, CFA
Q3-16
56.7
4.5
3.8
2.9
56.4
56.5
2.7
2.0
1.7
1.6
1.0
0.6
0.5
0.7
0.2
56.0
0.0 55.5
Q1-16
Q2-16
Q3-16
Q4-16
Q1-17
Q2-17
[email protected] Source for the above charts : OPEC and Bloomberg
KAMCO Investment Research Department, 16th Floor, Al-Shaheed Tower, Khalid Bin Al-Waleed Street- Sharq,P.O. BOX : 28873, Safat 13149, Kuwait Tel.: (+965) 1 852 626 Fax: (+965) 2249 2395 Email: [email protected] Website: http://www.kamconline.com
Q3-17
Q4-17
KAMCO Research February - 2017
Oil Prices OPEC and Brent crude reached a new high of USD 54.24/b and USD 55.94 /b, respectively, during Feburary-17 after three consecutive sessions of gains at the start of the month as a result of reported decline of 46 tb/d in US crude production, according to EIA. According to the agency’s Short Term Energy Outlook, the oil market is expected to balance sooner than previously expected after the increase in world oil inventories over the past few years comes to a halt and higher economic growth in both developed and emerging markets drive higher global oil demand over the next two years. The report included an upward revision to Chinese oil consumption and supply as well as demand outside the OECD countries. Nevertheless, the agency also expects US oil production to reach a 48-year high level of 9.53 mb/d in 2018 as domestic shale oil producers benefit from higher oil prices as a result of OPEC production cuts.
OPEC Reference Basket Avg. Monthly Price Trend
USD/b 65.0
30.0% 20.7%
19.6%
60.0
14.1%
55.0 50.0
10.0%
8.4%
1.0%
6.1% -6.9%
45.0 43.2
40.0 35.0
45.8 42.7
51.7 -0.5% 47.9 -9.7%
43.2
43.1 42.9
26.5
1.4%
0.0%
52.4
-10.0% -20.0%
37.9
-21.2%
34.7
-30.0%
30.0 25.0
20.0%
11.6%
9.3%
28.7
-40.0%
Source: Bloomberg
This was also reflected in the weekly rig count data by Baker Hughes that reported an increase in rig count in 14 out of 15 weeks. According to Baker Hughes, US oil companies added the highest number of rigs since 2012 over the past four weeks with an increase of more than 60 rigs taking the total count to 591 active rigs, the highest rig count since October-15. Furthermore, oil prices also got support from USD weakness that traded at a two month low level against a basket of currency, although the trend seemed to have reversed during the second week of February-17 after hopes that U.S. tax cuts would drive corporate profits and investments in the US lifted the greenback. Average OPEC crude price during January-17 stood at USD 52.4/b, a marginal increase of 1.4% as compared to the previous month as crude traded within a very tight range during the month. Brent crude and Kuwait crude also traded higher as compared to the previous month with average prices up by 1.1% and 1.9%, respectively, for the two grades of crude oil. The trend during the first half of February17 was also positive with marginal increase in average prices. We expect oil price to remain range bound in the near term until the production cuts remain in effect. Beyond June-17, we expect additional pressure on prices as producers emerge from the temporary cuts. Average Crude Oil Prices, USD/b
Dec-16
Jan-17
Change
YTD-2016
YTD-2017
OPEC Reference Basket
51.7
52.4
0.7
26.5
52.4
Ara b Li ght Ba s ra h Li ght Bonny Li ght Es Si der Gi ra s s ol Ira n Hea vy Kuwait Export Qa ta r Merey Murba n Ori ente Ra bi Sa ha ra n Bl end
51.9 50.9 53.9 52.1 53.4 51.4 50.9 52.1 45.9 54.9 48.7 52.2 53.8
52.3 51.7 55.0 53.1 54.4 51.9 51.5 53.4 46.8 56.0 48.6 53.1 54.8
0.4 0.8 1.1 1.0 1.0 0.5 0.6 1.4 1.0 1.0 (0.0) 0.9 1.0
26.4 24.7 30.4 29.8 30.0 24.1 23.9 27.0 20.8 31.6 24.0 29.3 31.3
52.3 51.7 55.0 53.1 54.4 51.9 51.5 53.4 46.8 56.0 48.6 53.1 54.8
Other Crudes Brent Duba i Is thmus LLS Ma rs Mi na s Ura l s WTI
53.6 52.1 53.8 53.5 49.4 49.7 52.3 52.0
54.6 53.7 55.0 54.1 49.9 50.6 53.4 52.5
1.0 1.6 1.2 0.5 0.5 1.0 1.1 0.5
30.8 26.8 30.0 32.7 27.5 30.8 29.2 31.5
54.6 53.7 55.0 54.1 49.9 50.6 53.4 52.5
Differentials Brent/WTI Brent/LLS Brent/Duba i
1.6 0.0 1.5
2.1 0.5 0.9
0.5 0.5 (0.6)
(0.7) (2.0) 3.9
2.1 0.5 0.9
Source: OPEC Monthly Oil Market Report - February 2017
Oil Market Monthly Report
2
KAMCO Research February - 2017
World Oil Demand Higher oil demand in OECD Europe and Asia Pacific, especially during 4Q-16, continued to positively impact OPEC’s demand projections for 2016. According to its latest monthly report, OPEC raised its world oil demand growth expectations for 2016 by 70 tb/d to 1.32 mb/d on the back of colder-than-expected weather in the aforementioned regions. Demand from US was raised by 50 tb/d for 3Q-16 and 4Q-16 with growth emanating primarily from the road transportation sector triggered by the low oil price environment. According to the latest monthly data for demand in the US, growth in November-16 was led by healthy economic growth and colder weather conditions, in addition to higher demand in the road transportation sector. OECD Europe also witnessed positive revision for all the four quarter of 2016 with higher-than expected demand growth in Poland, Spain, Sweden, Turkey and the UK on the back of better economic conditions, World Oil Demand - 2015/2016, mb/d
2015
Q1-16
Q2-16
Q3-16
Q4-16
2016
Y-o-Y Growth
% Chg.
Americas of which US Europe As ia Pacific Total OECD Other As ia of which India Latin America Middle Eas t Africa Total Developing Countries (DCs) Former Soviet Union (FSU) Other Europe China Total "Other Regions"
24.59 19.84 13.73 8.04 46.37 12.04 4.05 6.56 7.97 3.99 30.57 4.62 0.67 11.07 16.37
24.55 19.84 13.64 8.57 46.77 12.42 4.54 6.19 7.94 4.12 30.68 4.49 0.68 10.96 16.14
24.67 19.99 13.94 7.64 46.24 12.63 4.29 6.49 7.79 4.09 31.00 4.37 0.64 11.48 16.50
25.12 20.32 14.38 7.74 47.24 12.37 4.12 6.76 8.37 4.03 31.53 4.73 0.68 11.36 16.77
24.77 20.02 13.91 8.28 46.97 12.83 4.56 6.37 7.79 4.14 31.12 5.04 0.77 11.69 17.50
24.78 20.04 13.97 8.05 46.81 12.56 4.38 6.45 7.97 4.10 31.09 4.66 0.70 11.38 16.73
0.18 0.20 0.24 0.02 0.44 0.52 0.33 (0.11) 0.00 0.10 0.52 0.04 0.02 0.30 0.37
0.75 1.02 1.72 0.23 0.95 4.31 8.06 (1.60) 0.00 2.59 1.69 0.81 3.57 2.74 2.23
Total World
93.30
93.58
93.74
95.55
95.59
94.62
1.32
1.42
Source: OPEC Monthly Oil Market Report - February 2017
increased vehicle sales and colder-than-expected weather conditions in Q4-16. The OECD Asia Pacific region, on the other hand, witnessed its first demand growth since 2012 after a positive adjustment of 20 tb/d to its 2016 demand projection. On the other hand, demand outlook for the non-OECD growth remained largely unchanged despite internal revisions as positive changes to demand figures for India and China were completely offset by downward revisions for LatAm and the Middle East and Africa regions. For 2017, after marginal upgrade in its previous report, OPEC raised demand growth expectations by 35 tb/d to 1.19 mb/d and full year demand is now expected to reach 95.81 mb/d. This increase is primarily expected to be driven by colder weather conditions and higher vehicle sales in OECD Europe, further supported by higher expectations for petrochemical feedstock requirements in OECD Asia Pacific that resulted in upward revision of 40 tb/d in Q1-17 and 20 tb/d for Q2-17. The colder weather conditions resulted in upward revisions of 50 tb/d for Q1-17 and 30 tb/d for Q2-17. Economic development in Europe and some of the Asian countries, including the Middle East, are expected to be the key driver of demand in 2017 that would be partially impacted by fuel substitution effect in some pockets (Japan and Mexico).
World Oil Demand - 2016/2017, mb/d
2016
Q1-17
Q2-17
Q3-17
Q4-17
2017
Y-o-Y Growth
% Chg.
Americas of which US Europe Asia Pacific Total OECD Other Asia of which India Latin America Middle East Africa Total Developing Countries (DCs) Former Soviet Union (FSU) Other Europe China Total "Other Regions"
24.78 20.04 13.97 8.05 46.81 12.56 4.38 6.45 7.97 4.10 31.09 4.66 0.70 11.38 16.73
24.77 19.98 13.72 8.55 47.04 12.73 4.67 6.28 8.07 4.23 31.30 4.56 0.71 11.24 16.51
24.82 20.09 14.00 7.58 46.40 13.00 4.42 6.53 7.91 4.19 31.63 4.42 0.66 11.74 16.83
25.37 20.54 14.40 7.71 47.49 12.73 4.30 6.81 8.46 4.14 32.14 4.79 0.70 11.65 17.14
24.93 20.17 13.95 8.22 47.10 13.20 4.69 6.46 7.90 4.26 31.83 5.10 0.80 11.93 17.83
24.98 20.19 14.02 8.01 47.01 12.92 4.52 6.52 8.08 4.20 31.72 4.72 0.72 11.64 17.08
0.20 0.15 0.05 (0.04) 0.20 0.35 0.14 0.07 0.11 0.11 0.64 0.06 0.02 0.27 0.35
0.79 0.75 0.35 (0.52) 0.43 2.80 3.25 1.07 1.36 2.64 2.05 1.30 3.15 2.35 2.09
Total World
94.62
94.84
94.85
96.77
96.76
95.81
1.19
1.26
Source: OPEC Monthly Oil Market Report - February 2017
Oil Market Monthly Report
3
KAMCO Research February - 2017
World Oil Supply Non-OPEC supply predictions for 2016 was revised upward by 50 tb/d and is expected to contract by 0.66 mb/d to reach year-end supply expectation of 57.2 mb/d. The upward revision mainly reflected higher-than-expected supply growth in Q4-16 in the US, Canada, Norway, Russia and China that was partially offset by downward revisions in Kazakhstan, Australia and Malaysia. The final quarter saw mo-m supply growth of a strong 1.08 mb/d reflecting higher production in response to strengthening oil prices. On the other hand, the overall contraction during the year was primarily on the back of lower production in OECD, China and Developing Countries, which were partially offset by higher production in Russia. The decline in the US was primarily from US onshore fields while the drop in output in China were primarily as a result of mature oil fields and lower investment by local oil companies. Non-OPEC Oil Supply - 2015/2016, mb/d
2015
Q1-16
Q2-16
Q3-16
Q4-16
2016
Y-o-Y Growth
% Chg.
Ameri ca s of whi ch US Europe As i a Pa ci fi c Total OECD Other As i a La ti n Ameri ca Mi ddl e Ea s t Afri ca Total Developing Countries (DCs) Former Sovi et Uni on (FSU) of whi ch Rus s i a Other Europe Chi na Total "Other regions" Total Non-OPEC Production Proces s i ng ga i ns
21.07 14.04 3.76 0.46 25.29 3.60 5.19 1.27 2.13 12.19 13.69 10.85 0.14 4.38 18.21 55.68 2.17
21.00 13.81 3.91 0.44 25.35 3.68 4.98 1.27 2.10 12.03 13.95 11.07 0.13 4.22 18.31 55.69 2.19
20.08 13.68 3.73 0.42 24.22 3.60 5.06 1.28 2.05 11.99 13.73 10.98 0.13 4.11 17.97 54.19 2.19
20.49 13.42 3.63 0.45 24.56 3.58 5.19 1.29 2.13 12.19 13.67 11.03 0.13 4.00 17.79 54.54 2.19
20.73 13.68 3.92 0.43 25.07 3.60 5.23 1.29 2.16 12.28 14.16 11.29 0.13 3.98 18.26 55.62 2.19
20.57 13.65 3.80 0.43 24.80 3.62 5.12 1.28 2.11 12.13 13.88 11.09 0.13 4.08 18.08 55.01 2.19
(0.49) (0.39) 0.04 (0.03) (0.48) 0.02 (0.07) 0.01 (0.02) (0.06) 0.18 0.25 0.00 (0.31) (0.13) (0.67) 0.01
(2.33) (2.81) 0.99 (6.34) (1.91) 0.55 (1.41) 0.78 (0.79) (0.49) 1.33 2.29 (3.51) (6.99) (0.71) (1.21) 0.60
Total Non-OPEC Supply
57.85
57.87
56.37
56.73
57.81
57.20
(0.66)
(1.14)
OPEC NGLs and non-conventionals OPEC Crude Oil Production Total World Supply
5.94 32.10 95.89
6.05 32.58 96.50
6.08 32.17 94.62
6.11 32.63 95.47
6.15 33.13 97.09
6.10
0.15
2.69
Source: OPEC Monthly Oil Market Report - February 2017
Non-OPEC supply forecast for 2017 were raised by 120 tb/d and is now expected to grow by 0.24 mb/d to average at 57.44 mb/d. The increase in expectations primarily reflected increased drilling activity and higher investment in the US, leading to higher onshore crude oil and NGLs production. US and Brazil are expected to make the highest contribution to supply growth during 2017, with a combined increase of almost 0.5 mb/d during the year followed by Canada (+0.18 mb/d) and Kazakhstan (0.14mb/d). That said, the expected decline in production as agreed between OPEC and non-OPEC countries would help to offset some of the oil glut. Evidently, the agreement resulted in global supply decline of 1.29 mb/d during January-17 to averaged at 95.82 mb/d.
Non-OPEC Oil Supply - 2016/2017, mb/d
2016
Q1-17
Q2-17
Q3-17
Q4-17
2017
Y-o-Y Growth
% Chg.
Americas of which US Europe As ia Pacific Total OECD Other As ia Latin America Middle East Africa Total Developing Countries (DCs) Former Soviet Union (FSU) of which Russia Other Europe China Total "Other regions"
20.57 13.65 3.80 0.43 24.80 3.62 5.12 1.28 2.11 12.13 13.88 11.09 0.13 4.08 18.08
20.92 13.88 3.84 0.45 25.21 3.64 5.23 1.24 2.13 12.23 13.87 10.98 0.14 3.95 17.96
20.57 13.78 3.73 0.46 24.76 3.59 5.25 1.23 2.15 12.22 13.83 10.97 0.14 3.89 17.87
20.81 13.88 3.54 0.45 24.80 3.56 5.29 1.24 2.22 12.31 13.94 11.08 0.14 3.87 17.95
20.97 13.99 3.82 0.42 25.21 3.53 5.38 1.24 2.24 12.39 14.02 11.11 0.15 3.88 18.05
20.82 13.88 3.73 0.44 24.99 3.58 5.29 1.24 2.18 12.29 13.92 11.03 0.14 3.90 17.96
0.25 0.24 (0.07) 0.01 0.19 (0.04) 0.17 (0.05) 0.07 0.16 0.04 (0.06) 0.01 (0.18) (0.13)
1.20 1.74 (1.72) 2.50 0.78 (1.00) 3.37 (3.65) 3.44 1.34 0.29 (0.54) 8.54 (4.33) (0.69)
Total Non-OPEC Production
55.01
55.40
54.85
55.07
55.65
55.24
0.23
0.42
Processing gains
2.19
2.20
2.20
2.20
2.20
2.20
0.01
0.50
Total Non-OPEC Supply
57.20
57.59
57.04
57.26
57.84
57.44
0.24
0.42
Source: OPEC Monthly Oil Market Report - February 2017
Oil Market Monthly Report
4
KAMCO Research February - 2017
OPEC Oil Production & Spare Capacity OPEC production reached the lowest level in 14 months and averaged at 32.3 mb/d during January-17 after witnessing a month-onmonth decline of 0.84 mb/d, according to Bloomberg. The decline was primarily on the back of 0.5 mb/d drop in production undertaken by Saudi Arabia followed by 160 tb/d decline in the UAE and 150 tb/d decline in Kuwait. Venezuela and Algeria also curbed production by a combined 140 tb/d. These declines were partially offset by higher production in Nigeria, Iran and Libya that added a combined 270 tb/d during the month. In terms of production cuts, the oil minister of Kuwait said that the compliance in OPEC was as high as 92% by the end of January-17. In addition, UAE has expressed hopes that the output cuts could even rise in the coming months as the impact of lower oil output reflects in higher prices. It was reportedly reiterated that Saudi Arabia has undertaken a higher than agreed share of the
Change
Production ('000 b/d)
Dec-16
Jan-17
Capacity
Spare Capacity
Total OPEC-13
33,140
32,300
-840
-2.5%
36,405
4,105
KSA
10,480
9,980
Ira q
4,630
4,510
-500
-4.8%
11,500
1,520
-120
-2.6%
4,700
Ira n
3,730
190
3,800
70
1.9%
4,000
200
U.A.E
3,070
2,910
-160
-5.2%
3,150
240
Kuwait
2,860
2,710
-150
-5.2%
3,000
290
Venezuel a
2,080
2,010
-70
-3.4%
2,500
490
Angol a
1,670
1,670
0
0.0%
1,870
200
Ni geri a
1,500
1,640
140
9.3%
2,200
560
Al geri a
1,110
1,040
-70
-6.3%
1,150
110
Qatar
620
615
-5
-0.8%
780
165
Ecua dor
550
530
-20
-3.6%
555
25
Li bya
630
690
60
9.5%
780
90
Ga bon Total OPEC-12
210
195
-15
-7.1%
220
25
28,510
27,790
-720
-2.53%
31,705
3,915
Source: Bloomberg, OPEC
production cuts to below the 10 mb/d mark, although the Kingdom was touted to slash output by 486 tb/d.
Mn b/d
OPEC Total Crude Oil Production
35.0 34.0
Meanwhile, after two consecutive months of marginal decline totaling 30 tb/d, Iran increased production during January-17 by 70 tb/d to reach 3.8 mb/d, a level which we believe the producer intends to maintain in the near term. However, in the longer run, the country needs to attract investment in oil infrastructure as the current production comes primarily from aging fields. Moreover, it was also reported that Iran has extended the deadline for submitting bids for oil and gas projects from its original deadline of January-17 to mid February -17 and has been working on introducing better contract terms to attract more investors in the sector. Nigeria also added 140 tb/d after two consecutive months of decline, although the production level of 1.64 mb/d still remains low as compared to the country’s peak level of 2.2 mb/d. Libya also added 60 tb/d during the month to 690 tb/d (700 tb/d according to OPEC report), the highest level in 3 years as it plans to increase production to 1 mb/d by the end of the year. We believe that a production recovery in Nigeria and higher production in Libya could dampen the prospects of oil market rebalancing during 2H-17, unless larger OPEC producers and non-OPEC players take a bigger share.
Oil Market Monthly Report
33.0 33.0
32.7
32.8
33.6
33.6
33.6
33.9
34.0
34.2 33.1
32.6 32.3
32.0 31.0 30.0 29.0
Source: Bloomberg
Share of Production 0.6% 2.1%
KSA
30.9%
Iraq
1.6%
Iran U.A.E
1.9%
Kuwait
3.2%
Venezuela 5.1% 14.0%
5.2%
Angola Nigeria Algeria Qatar
6.2% 11.8% 8.4%
9.0%
Ecuador
Libya Gabon
Source: Bloomberg
5
KAMCO Research February - 2017
Brent Crude Oil Price Forecast by Various Research Houses Firm
Analyst
As Of
Q1 17
Q2 17
Q3 17
Q4 17
Wes tpa c Ba nki ng Corp
J. Smi rk
9/Feb/17
56.0
56.0
54.0
52.0
Ca pi ta l Economi cs Ltd Ll oyds Ba nk PLC
T. Pugh
8/Feb/17 7/Feb/17
55.0 55.0
54.0 60.0
57.0 65.0
59.0 65.0
Commerzba nk AG Na ti xi s SA
E. Wei nberg A. Des hpa nde
3/Feb/17
54.0
50.0
50.0
48.0
Intes a Sa npa ol o SpA
D. Cors i ni
3/Feb/17 2/Feb/17
56.0 54.0
59.0 54.0
65.0 54.0
65.0 55.0
Ci ti group Inc Pres ti ge Economi cs LLC
E. Mors e J. Schenker
31/Ja n/17
50.0
54.0
60.0
65.0
30/Ja n/17
56.0
59.5
62.0
65.0
Proms vya zba nk PJSC Ita u Uni ba nco Hol di ng SA
S. Na rkevi ch A. Pa s s os
30/Ja n/17 25/Ja n/17
53.4 55.9
54.7 55.3
55.9 54.8
54.7 54.2
BNP Pa ri ba s SA
H. Tchi l i ngui ri a n
25/Ja n/17
54.0
57.0
59.0
62.0
HSH Nordba nk AG Emi ra tes NBD PJSC
J. Edel ma nn E. Bel l
25/Ja n/17 18/Ja n/17
53.0 52.0
51.0 55.0
49.0 55.0
47.0 60.0
ABN AMRO Ba nk NV Wel l s Fa rgo Securi ti es LLC
H. Va n Cl eef R. Rea d
12/Ja n/17 11/Ja n/17
50.0 55.5
50.0 61.0
55.0 60.0
55.0 58.0
Nordea Ba nk Norge ASA Ma rket Ri s k Advi s ory Co Ltd
T. Sa l tvedt N. Ni i mura
10/Ja n/17 6/Ja n/17
53.0 54.0
56.0 54.0
58.0 56.0
59.0 59.0
DZ Ba nk AG Deuts che Zentra l -Genos s ens cha fts ba nk
A. Herl i ngha us
4/Ja n/17
53.0
54.0
55.0
58.0
Sa nta nder UK PLC Norddeuts che La ndes ba nk Gi rozentra l e
J. Kenney F. Kunze
4/Ja n/17 4/Ja n/17
54.0 55.0
50.5 54.0
52.0 60.0
53.5 60.0
Soci ete Genera l e SA Ra i ffei s en Ba nk Interna ti ona l AG
M. Wi ttner H. Loa cker
20/Dec/16 20/Dec/16
52.5 54.0
55.0 58.0
57.5 61.0
60.0 60.0
Schnei der El ectri c SE Reel Ka pi ta l Menkul Degerl er AS
K. Li u E. Erka n
19/Dec/16 16/Dec/16
53.0 55.0
57.1 56.0
55.7 56.0
52.1 58.0
RBC Ca pi ta l Ma rkets
G. Pa rdy
15/Dec/16
55.6
57.1
59.1
60.6
Ba rcl a ys PLC Ba nk of Nova Scoti a /The
M. Cohen M. Loewen
15/Dec/16 14/Dec/16
57.0 58.0
62.0 60.0
56.0 60.0
53.0 62.0
La ndes ba nk Ba den-Wuerttemberg Uni Credi t Ba nk AG
F. Kl umpp J. Hi tzfel d
12/Dec/16
55.0 52.0
55.0 55.0
55.0 59.0
60.0 60.0
Overs ea -Chi nes e Ba nki ng Corp Ltd NE Nomi s ma Energi a Srl
B. Ga n M. Ma zzoni
6/Dec/16 30/Nov/16
57.5
60.0 49.1
62.5 51.0
65.0
46.9
Fl exi hedge Ltd
J. Mi l l er
24/Oct/16
50.0
52.0
54.0
56.0
MPS Ca pi ta l Servi ces Ba nca per l e Impres e SpA Da ns ke Ba nk A/S
M. Porci a tti J. Peders en
17/Oct/16
52.0
4/Oct/16
52.0
55.0 54.0
60.0 56.0
58.0 58.0
Sta nda rd Cha rtered Ba nk Ri s i ng Gl ory Fi na nce Ltd
P. Hors nel l E. La s hi ns ki
29/Sep/16 21/Sep/16
57.0 43.0
63.0 36.0
66.0 31.0
68.0 41.0
Toronto-Domi ni on Ba nk/Toronto Incrementum AG
B. Mel ek
19/Sep/16 26/Aug/16
59.0 62.0
61.0
R. Stoeferl e
65.0
61.0 72.0
62.0 73.0
Jefferi es LLC
J. Ga mmel
C. Pa ra s keva s
9/Dec/16
52.7
23/Aug/16
53.0
56.0
59.0
63.0
Aus tra l i a & New Zea l a nd Ba nki ng Group Ltd/Mel bourne D. Hynes Ba nk of Ameri ca Merri l l Lynch F. Bl a nch
19/Aug/16 17/Aug/16
53.0
60.0 59.0
58.0 66.0
59.0 64.0
DNB ASA Evercore Pa rtners Inc
T. Kjus C. Zha o
17/Aug/16 16/Aug/16
60.0 45.0
65.0 50.0
65.0 50.0
70.0 55.0
ING Ba nk NV
H. Kha n
9/Aug/16
35.0
40.0
45.0
45.0
Median Mean
54.0 53.8
55.2 55.6
57.3 57.2
59.0 58.5
High Low
62.0 43.0
65.0 36.0
72.0 31.0
73.0 41.0
Current Fwd
56.3
57.5
57.7
57.5
Difference (Median - Current)
-2.3
-2.4
-0.4
1.5
55.0
Source: Bloomberg
Oil Market Monthly Report
6
Disclaimer & Important Disclosures KAMCO is authorized and fully regulated by the Capital Markets Authority ("CMA, Kuwait") and partially regulated by the Central Bank of Kuwait (“CBK”) This document is provided for informational purposes only. Nothing contained in this document constitutes investment, an offer to invest , legal, tax or other advice or guidance and should be disregarded when considering or making investment decisions. In preparing this document, KAMCO did not take into account the investment objectives, financial situation and particular needs of any particular person. Accordingly, before acting on this document, investors should independently evaluate the investments and strategies referred to herein and make their own determination of whether it is appropriate in light of their own financial circumstances and objectives. The entire content of this document is subject to copyright with all rights reserved. This research and the information contained herein may not be reproduced, distributed or transmitted in Kuwait or in any other jurisdiction to any other person or incorporated in any way into another document or other material without our prior written consent. Analyst Certification Each of the analysts identified in this report certifies, with respect to the sector, companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report. KAMCO Ratings KAMCO investment research is based on the analysis of regional and country economics, industries and company fundamentals. KAMCO company research reflects a long-term (12-month) target price for a company or stock. The ratings bands are:
Outperform: Target Price represents expected returns >= 10% in the next 12 months
Neutral: Target Price represents expected returns between -10% and +10% in the next 12 months
Underperform: Target Price represents an expected return of
February - 2017
Production cut keeps oil prices steady...
In this Report... Oil Prices ……………....….
2
Oil Demand .………………
3
Oil Supply ………….….…..
4
Reserve & Capacity …...
5
Oil Price Forecast ………
6
Oil prices remained elevated since the start of the year on the back of better than expected compliance to the agreed production cuts by OPEC and non-OPEC producers. According to the IEA, compliance by OPEC producers stood at 90% as larger-than-agreed cuts by Saudi Arabia was partially offset by higher production from Libya and Nigeria, which are exempt from the agreement. The production rate by OPEC during the month stood at 32.3 mb/d, lowest level in 14-months, according to Bloomberg, whereas OPEC’s monthly report puts the number at 32.139 mb/d, according to secondary sources. In the non-OPEC camp, the cuts were estimated to have reached 269 tb/d during January-17 as compared to levels seen during the last quarter of 2016 for the eleven producers that have agreed to slash productions, including Russia and Kazakhstan. This is almost 50% of the agreed upon cuts of around 558 tb/d for the non-OPEC producers. Meanwhile, the optimism related to lower output was almost balanced by rising oil output in the US as seen from the rising rig count. According to Baker Hughes, US oil companies added the highest number of rigs since 2012 over the past four weeks with an increase of more than 60 rigs taking the total count to 591 active rigs. This is also the highest rig count since October-15 as drillers added rigs in 14 out of 15 weeks. According to Reuters data, oil production in the US has increased by almost 528 tb/d since the last quarter of 2016 as oil firms pumped more oil to take the advantage of higher prices. On the other hand, demand side factors are also said to have been positive over the last quarter of 2016, especially in Europe due to colder weather conditions. For 2017, oil demand is expected to benefit from higher consumption in China and other non-OECD countries coupled with expectations of higher economic growth led demand in Europe. Both IEA and the OPEC monthly reports have pointed at higher oil demand during 2017 with IEA predicting a demand growth of 1.4 mb/d (an increase of 0.1 mb/d as compared to its previous forecast) and OPEC expecting a slightly lower demand growth of 1.2 mb/d (up 35 tb/d from its previous forecast). One of the key markets for oil, India, is expected to remain strong in the long run, however, we believe that the recent policy initiatives have affected demand during the last quarter of 2016 that spilled over to 2017. According to the country’s Oil Ministry, India’s monthly oil demand declined the most since May-03 with fuel consumption down 4.5% during January-17. The opposing forces of positive demand and higher supply resulted in oil trading within a very tight range during the month. Average OPEC crude price during January-17 stood at USD 52.4/b, a marginal increase of 1.4% as compared to the previous month. Brent crude and Kuwait crude also traded higher as compared to the previous month with average prices up by 1.1% and 1.9%, respectively. KAMCO Research expects oil price to remain range bound in the near term until the production cuts remain in effect. Beyond June-17, we expect additional pressure on prices as producers emerge from the temporary cuts. USD/b 57.0
OPEC
Kuwait
Mn b/d 97.5
Brent
World Oil Demand - 2016/2017, mb/d
96.5
56.0
95.6
94.5
54.0
93.6
93.7
Q1-16
Q2-16
96.8
Q3-17
Q4-17
95.6
95.5
55.0
96.8
94.8
94.9
Q1-17
Q2-17
93.5
53.0
92.5
52.0
91.5
51.0
90.5 89.5
50.0
88.5
Head - Investment Research +(965) 2233 6907 [email protected]
10.0
Non-OPEC Oil Supply - 2016/2017, mb/d 57.9
57.8
57.8 57.6
10.0 57.5
57.3 57.0
57.0
6.0
2.0
Assistant Vice President +(965) 2233 6912
Q4-16
8.0
4.0
Junaid Ansari
Mn b/d 58.0
OPEC Members Oil Production - Jan-17
Mn b/d 12.0
Faisal Hasan, CFA
Q3-16
56.7
4.5
3.8
2.9
56.4
56.5
2.7
2.0
1.7
1.6
1.0
0.6
0.5
0.7
0.2
56.0
0.0 55.5
Q1-16
Q2-16
Q3-16
Q4-16
Q1-17
Q2-17
[email protected] Source for the above charts : OPEC and Bloomberg
KAMCO Investment Research Department, 16th Floor, Al-Shaheed Tower, Khalid Bin Al-Waleed Street- Sharq,P.O. BOX : 28873, Safat 13149, Kuwait Tel.: (+965) 1 852 626 Fax: (+965) 2249 2395 Email: [email protected] Website: http://www.kamconline.com
Q3-17
Q4-17
KAMCO Research February - 2017
Oil Prices OPEC and Brent crude reached a new high of USD 54.24/b and USD 55.94 /b, respectively, during Feburary-17 after three consecutive sessions of gains at the start of the month as a result of reported decline of 46 tb/d in US crude production, according to EIA. According to the agency’s Short Term Energy Outlook, the oil market is expected to balance sooner than previously expected after the increase in world oil inventories over the past few years comes to a halt and higher economic growth in both developed and emerging markets drive higher global oil demand over the next two years. The report included an upward revision to Chinese oil consumption and supply as well as demand outside the OECD countries. Nevertheless, the agency also expects US oil production to reach a 48-year high level of 9.53 mb/d in 2018 as domestic shale oil producers benefit from higher oil prices as a result of OPEC production cuts.
OPEC Reference Basket Avg. Monthly Price Trend
USD/b 65.0
30.0% 20.7%
19.6%
60.0
14.1%
55.0 50.0
10.0%
8.4%
1.0%
6.1% -6.9%
45.0 43.2
40.0 35.0
45.8 42.7
51.7 -0.5% 47.9 -9.7%
43.2
43.1 42.9
26.5
1.4%
0.0%
52.4
-10.0% -20.0%
37.9
-21.2%
34.7
-30.0%
30.0 25.0
20.0%
11.6%
9.3%
28.7
-40.0%
Source: Bloomberg
This was also reflected in the weekly rig count data by Baker Hughes that reported an increase in rig count in 14 out of 15 weeks. According to Baker Hughes, US oil companies added the highest number of rigs since 2012 over the past four weeks with an increase of more than 60 rigs taking the total count to 591 active rigs, the highest rig count since October-15. Furthermore, oil prices also got support from USD weakness that traded at a two month low level against a basket of currency, although the trend seemed to have reversed during the second week of February-17 after hopes that U.S. tax cuts would drive corporate profits and investments in the US lifted the greenback. Average OPEC crude price during January-17 stood at USD 52.4/b, a marginal increase of 1.4% as compared to the previous month as crude traded within a very tight range during the month. Brent crude and Kuwait crude also traded higher as compared to the previous month with average prices up by 1.1% and 1.9%, respectively, for the two grades of crude oil. The trend during the first half of February17 was also positive with marginal increase in average prices. We expect oil price to remain range bound in the near term until the production cuts remain in effect. Beyond June-17, we expect additional pressure on prices as producers emerge from the temporary cuts. Average Crude Oil Prices, USD/b
Dec-16
Jan-17
Change
YTD-2016
YTD-2017
OPEC Reference Basket
51.7
52.4
0.7
26.5
52.4
Ara b Li ght Ba s ra h Li ght Bonny Li ght Es Si der Gi ra s s ol Ira n Hea vy Kuwait Export Qa ta r Merey Murba n Ori ente Ra bi Sa ha ra n Bl end
51.9 50.9 53.9 52.1 53.4 51.4 50.9 52.1 45.9 54.9 48.7 52.2 53.8
52.3 51.7 55.0 53.1 54.4 51.9 51.5 53.4 46.8 56.0 48.6 53.1 54.8
0.4 0.8 1.1 1.0 1.0 0.5 0.6 1.4 1.0 1.0 (0.0) 0.9 1.0
26.4 24.7 30.4 29.8 30.0 24.1 23.9 27.0 20.8 31.6 24.0 29.3 31.3
52.3 51.7 55.0 53.1 54.4 51.9 51.5 53.4 46.8 56.0 48.6 53.1 54.8
Other Crudes Brent Duba i Is thmus LLS Ma rs Mi na s Ura l s WTI
53.6 52.1 53.8 53.5 49.4 49.7 52.3 52.0
54.6 53.7 55.0 54.1 49.9 50.6 53.4 52.5
1.0 1.6 1.2 0.5 0.5 1.0 1.1 0.5
30.8 26.8 30.0 32.7 27.5 30.8 29.2 31.5
54.6 53.7 55.0 54.1 49.9 50.6 53.4 52.5
Differentials Brent/WTI Brent/LLS Brent/Duba i
1.6 0.0 1.5
2.1 0.5 0.9
0.5 0.5 (0.6)
(0.7) (2.0) 3.9
2.1 0.5 0.9
Source: OPEC Monthly Oil Market Report - February 2017
Oil Market Monthly Report
2
KAMCO Research February - 2017
World Oil Demand Higher oil demand in OECD Europe and Asia Pacific, especially during 4Q-16, continued to positively impact OPEC’s demand projections for 2016. According to its latest monthly report, OPEC raised its world oil demand growth expectations for 2016 by 70 tb/d to 1.32 mb/d on the back of colder-than-expected weather in the aforementioned regions. Demand from US was raised by 50 tb/d for 3Q-16 and 4Q-16 with growth emanating primarily from the road transportation sector triggered by the low oil price environment. According to the latest monthly data for demand in the US, growth in November-16 was led by healthy economic growth and colder weather conditions, in addition to higher demand in the road transportation sector. OECD Europe also witnessed positive revision for all the four quarter of 2016 with higher-than expected demand growth in Poland, Spain, Sweden, Turkey and the UK on the back of better economic conditions, World Oil Demand - 2015/2016, mb/d
2015
Q1-16
Q2-16
Q3-16
Q4-16
2016
Y-o-Y Growth
% Chg.
Americas of which US Europe As ia Pacific Total OECD Other As ia of which India Latin America Middle Eas t Africa Total Developing Countries (DCs) Former Soviet Union (FSU) Other Europe China Total "Other Regions"
24.59 19.84 13.73 8.04 46.37 12.04 4.05 6.56 7.97 3.99 30.57 4.62 0.67 11.07 16.37
24.55 19.84 13.64 8.57 46.77 12.42 4.54 6.19 7.94 4.12 30.68 4.49 0.68 10.96 16.14
24.67 19.99 13.94 7.64 46.24 12.63 4.29 6.49 7.79 4.09 31.00 4.37 0.64 11.48 16.50
25.12 20.32 14.38 7.74 47.24 12.37 4.12 6.76 8.37 4.03 31.53 4.73 0.68 11.36 16.77
24.77 20.02 13.91 8.28 46.97 12.83 4.56 6.37 7.79 4.14 31.12 5.04 0.77 11.69 17.50
24.78 20.04 13.97 8.05 46.81 12.56 4.38 6.45 7.97 4.10 31.09 4.66 0.70 11.38 16.73
0.18 0.20 0.24 0.02 0.44 0.52 0.33 (0.11) 0.00 0.10 0.52 0.04 0.02 0.30 0.37
0.75 1.02 1.72 0.23 0.95 4.31 8.06 (1.60) 0.00 2.59 1.69 0.81 3.57 2.74 2.23
Total World
93.30
93.58
93.74
95.55
95.59
94.62
1.32
1.42
Source: OPEC Monthly Oil Market Report - February 2017
increased vehicle sales and colder-than-expected weather conditions in Q4-16. The OECD Asia Pacific region, on the other hand, witnessed its first demand growth since 2012 after a positive adjustment of 20 tb/d to its 2016 demand projection. On the other hand, demand outlook for the non-OECD growth remained largely unchanged despite internal revisions as positive changes to demand figures for India and China were completely offset by downward revisions for LatAm and the Middle East and Africa regions. For 2017, after marginal upgrade in its previous report, OPEC raised demand growth expectations by 35 tb/d to 1.19 mb/d and full year demand is now expected to reach 95.81 mb/d. This increase is primarily expected to be driven by colder weather conditions and higher vehicle sales in OECD Europe, further supported by higher expectations for petrochemical feedstock requirements in OECD Asia Pacific that resulted in upward revision of 40 tb/d in Q1-17 and 20 tb/d for Q2-17. The colder weather conditions resulted in upward revisions of 50 tb/d for Q1-17 and 30 tb/d for Q2-17. Economic development in Europe and some of the Asian countries, including the Middle East, are expected to be the key driver of demand in 2017 that would be partially impacted by fuel substitution effect in some pockets (Japan and Mexico).
World Oil Demand - 2016/2017, mb/d
2016
Q1-17
Q2-17
Q3-17
Q4-17
2017
Y-o-Y Growth
% Chg.
Americas of which US Europe Asia Pacific Total OECD Other Asia of which India Latin America Middle East Africa Total Developing Countries (DCs) Former Soviet Union (FSU) Other Europe China Total "Other Regions"
24.78 20.04 13.97 8.05 46.81 12.56 4.38 6.45 7.97 4.10 31.09 4.66 0.70 11.38 16.73
24.77 19.98 13.72 8.55 47.04 12.73 4.67 6.28 8.07 4.23 31.30 4.56 0.71 11.24 16.51
24.82 20.09 14.00 7.58 46.40 13.00 4.42 6.53 7.91 4.19 31.63 4.42 0.66 11.74 16.83
25.37 20.54 14.40 7.71 47.49 12.73 4.30 6.81 8.46 4.14 32.14 4.79 0.70 11.65 17.14
24.93 20.17 13.95 8.22 47.10 13.20 4.69 6.46 7.90 4.26 31.83 5.10 0.80 11.93 17.83
24.98 20.19 14.02 8.01 47.01 12.92 4.52 6.52 8.08 4.20 31.72 4.72 0.72 11.64 17.08
0.20 0.15 0.05 (0.04) 0.20 0.35 0.14 0.07 0.11 0.11 0.64 0.06 0.02 0.27 0.35
0.79 0.75 0.35 (0.52) 0.43 2.80 3.25 1.07 1.36 2.64 2.05 1.30 3.15 2.35 2.09
Total World
94.62
94.84
94.85
96.77
96.76
95.81
1.19
1.26
Source: OPEC Monthly Oil Market Report - February 2017
Oil Market Monthly Report
3
KAMCO Research February - 2017
World Oil Supply Non-OPEC supply predictions for 2016 was revised upward by 50 tb/d and is expected to contract by 0.66 mb/d to reach year-end supply expectation of 57.2 mb/d. The upward revision mainly reflected higher-than-expected supply growth in Q4-16 in the US, Canada, Norway, Russia and China that was partially offset by downward revisions in Kazakhstan, Australia and Malaysia. The final quarter saw mo-m supply growth of a strong 1.08 mb/d reflecting higher production in response to strengthening oil prices. On the other hand, the overall contraction during the year was primarily on the back of lower production in OECD, China and Developing Countries, which were partially offset by higher production in Russia. The decline in the US was primarily from US onshore fields while the drop in output in China were primarily as a result of mature oil fields and lower investment by local oil companies. Non-OPEC Oil Supply - 2015/2016, mb/d
2015
Q1-16
Q2-16
Q3-16
Q4-16
2016
Y-o-Y Growth
% Chg.
Ameri ca s of whi ch US Europe As i a Pa ci fi c Total OECD Other As i a La ti n Ameri ca Mi ddl e Ea s t Afri ca Total Developing Countries (DCs) Former Sovi et Uni on (FSU) of whi ch Rus s i a Other Europe Chi na Total "Other regions" Total Non-OPEC Production Proces s i ng ga i ns
21.07 14.04 3.76 0.46 25.29 3.60 5.19 1.27 2.13 12.19 13.69 10.85 0.14 4.38 18.21 55.68 2.17
21.00 13.81 3.91 0.44 25.35 3.68 4.98 1.27 2.10 12.03 13.95 11.07 0.13 4.22 18.31 55.69 2.19
20.08 13.68 3.73 0.42 24.22 3.60 5.06 1.28 2.05 11.99 13.73 10.98 0.13 4.11 17.97 54.19 2.19
20.49 13.42 3.63 0.45 24.56 3.58 5.19 1.29 2.13 12.19 13.67 11.03 0.13 4.00 17.79 54.54 2.19
20.73 13.68 3.92 0.43 25.07 3.60 5.23 1.29 2.16 12.28 14.16 11.29 0.13 3.98 18.26 55.62 2.19
20.57 13.65 3.80 0.43 24.80 3.62 5.12 1.28 2.11 12.13 13.88 11.09 0.13 4.08 18.08 55.01 2.19
(0.49) (0.39) 0.04 (0.03) (0.48) 0.02 (0.07) 0.01 (0.02) (0.06) 0.18 0.25 0.00 (0.31) (0.13) (0.67) 0.01
(2.33) (2.81) 0.99 (6.34) (1.91) 0.55 (1.41) 0.78 (0.79) (0.49) 1.33 2.29 (3.51) (6.99) (0.71) (1.21) 0.60
Total Non-OPEC Supply
57.85
57.87
56.37
56.73
57.81
57.20
(0.66)
(1.14)
OPEC NGLs and non-conventionals OPEC Crude Oil Production Total World Supply
5.94 32.10 95.89
6.05 32.58 96.50
6.08 32.17 94.62
6.11 32.63 95.47
6.15 33.13 97.09
6.10
0.15
2.69
Source: OPEC Monthly Oil Market Report - February 2017
Non-OPEC supply forecast for 2017 were raised by 120 tb/d and is now expected to grow by 0.24 mb/d to average at 57.44 mb/d. The increase in expectations primarily reflected increased drilling activity and higher investment in the US, leading to higher onshore crude oil and NGLs production. US and Brazil are expected to make the highest contribution to supply growth during 2017, with a combined increase of almost 0.5 mb/d during the year followed by Canada (+0.18 mb/d) and Kazakhstan (0.14mb/d). That said, the expected decline in production as agreed between OPEC and non-OPEC countries would help to offset some of the oil glut. Evidently, the agreement resulted in global supply decline of 1.29 mb/d during January-17 to averaged at 95.82 mb/d.
Non-OPEC Oil Supply - 2016/2017, mb/d
2016
Q1-17
Q2-17
Q3-17
Q4-17
2017
Y-o-Y Growth
% Chg.
Americas of which US Europe As ia Pacific Total OECD Other As ia Latin America Middle East Africa Total Developing Countries (DCs) Former Soviet Union (FSU) of which Russia Other Europe China Total "Other regions"
20.57 13.65 3.80 0.43 24.80 3.62 5.12 1.28 2.11 12.13 13.88 11.09 0.13 4.08 18.08
20.92 13.88 3.84 0.45 25.21 3.64 5.23 1.24 2.13 12.23 13.87 10.98 0.14 3.95 17.96
20.57 13.78 3.73 0.46 24.76 3.59 5.25 1.23 2.15 12.22 13.83 10.97 0.14 3.89 17.87
20.81 13.88 3.54 0.45 24.80 3.56 5.29 1.24 2.22 12.31 13.94 11.08 0.14 3.87 17.95
20.97 13.99 3.82 0.42 25.21 3.53 5.38 1.24 2.24 12.39 14.02 11.11 0.15 3.88 18.05
20.82 13.88 3.73 0.44 24.99 3.58 5.29 1.24 2.18 12.29 13.92 11.03 0.14 3.90 17.96
0.25 0.24 (0.07) 0.01 0.19 (0.04) 0.17 (0.05) 0.07 0.16 0.04 (0.06) 0.01 (0.18) (0.13)
1.20 1.74 (1.72) 2.50 0.78 (1.00) 3.37 (3.65) 3.44 1.34 0.29 (0.54) 8.54 (4.33) (0.69)
Total Non-OPEC Production
55.01
55.40
54.85
55.07
55.65
55.24
0.23
0.42
Processing gains
2.19
2.20
2.20
2.20
2.20
2.20
0.01
0.50
Total Non-OPEC Supply
57.20
57.59
57.04
57.26
57.84
57.44
0.24
0.42
Source: OPEC Monthly Oil Market Report - February 2017
Oil Market Monthly Report
4
KAMCO Research February - 2017
OPEC Oil Production & Spare Capacity OPEC production reached the lowest level in 14 months and averaged at 32.3 mb/d during January-17 after witnessing a month-onmonth decline of 0.84 mb/d, according to Bloomberg. The decline was primarily on the back of 0.5 mb/d drop in production undertaken by Saudi Arabia followed by 160 tb/d decline in the UAE and 150 tb/d decline in Kuwait. Venezuela and Algeria also curbed production by a combined 140 tb/d. These declines were partially offset by higher production in Nigeria, Iran and Libya that added a combined 270 tb/d during the month. In terms of production cuts, the oil minister of Kuwait said that the compliance in OPEC was as high as 92% by the end of January-17. In addition, UAE has expressed hopes that the output cuts could even rise in the coming months as the impact of lower oil output reflects in higher prices. It was reportedly reiterated that Saudi Arabia has undertaken a higher than agreed share of the
Change
Production ('000 b/d)
Dec-16
Jan-17
Capacity
Spare Capacity
Total OPEC-13
33,140
32,300
-840
-2.5%
36,405
4,105
KSA
10,480
9,980
Ira q
4,630
4,510
-500
-4.8%
11,500
1,520
-120
-2.6%
4,700
Ira n
3,730
190
3,800
70
1.9%
4,000
200
U.A.E
3,070
2,910
-160
-5.2%
3,150
240
Kuwait
2,860
2,710
-150
-5.2%
3,000
290
Venezuel a
2,080
2,010
-70
-3.4%
2,500
490
Angol a
1,670
1,670
0
0.0%
1,870
200
Ni geri a
1,500
1,640
140
9.3%
2,200
560
Al geri a
1,110
1,040
-70
-6.3%
1,150
110
Qatar
620
615
-5
-0.8%
780
165
Ecua dor
550
530
-20
-3.6%
555
25
Li bya
630
690
60
9.5%
780
90
Ga bon Total OPEC-12
210
195
-15
-7.1%
220
25
28,510
27,790
-720
-2.53%
31,705
3,915
Source: Bloomberg, OPEC
production cuts to below the 10 mb/d mark, although the Kingdom was touted to slash output by 486 tb/d.
Mn b/d
OPEC Total Crude Oil Production
35.0 34.0
Meanwhile, after two consecutive months of marginal decline totaling 30 tb/d, Iran increased production during January-17 by 70 tb/d to reach 3.8 mb/d, a level which we believe the producer intends to maintain in the near term. However, in the longer run, the country needs to attract investment in oil infrastructure as the current production comes primarily from aging fields. Moreover, it was also reported that Iran has extended the deadline for submitting bids for oil and gas projects from its original deadline of January-17 to mid February -17 and has been working on introducing better contract terms to attract more investors in the sector. Nigeria also added 140 tb/d after two consecutive months of decline, although the production level of 1.64 mb/d still remains low as compared to the country’s peak level of 2.2 mb/d. Libya also added 60 tb/d during the month to 690 tb/d (700 tb/d according to OPEC report), the highest level in 3 years as it plans to increase production to 1 mb/d by the end of the year. We believe that a production recovery in Nigeria and higher production in Libya could dampen the prospects of oil market rebalancing during 2H-17, unless larger OPEC producers and non-OPEC players take a bigger share.
Oil Market Monthly Report
33.0 33.0
32.7
32.8
33.6
33.6
33.6
33.9
34.0
34.2 33.1
32.6 32.3
32.0 31.0 30.0 29.0
Source: Bloomberg
Share of Production 0.6% 2.1%
KSA
30.9%
Iraq
1.6%
Iran U.A.E
1.9%
Kuwait
3.2%
Venezuela 5.1% 14.0%
5.2%
Angola Nigeria Algeria Qatar
6.2% 11.8% 8.4%
9.0%
Ecuador
Libya Gabon
Source: Bloomberg
5
KAMCO Research February - 2017
Brent Crude Oil Price Forecast by Various Research Houses Firm
Analyst
As Of
Q1 17
Q2 17
Q3 17
Q4 17
Wes tpa c Ba nki ng Corp
J. Smi rk
9/Feb/17
56.0
56.0
54.0
52.0
Ca pi ta l Economi cs Ltd Ll oyds Ba nk PLC
T. Pugh
8/Feb/17 7/Feb/17
55.0 55.0
54.0 60.0
57.0 65.0
59.0 65.0
Commerzba nk AG Na ti xi s SA
E. Wei nberg A. Des hpa nde
3/Feb/17
54.0
50.0
50.0
48.0
Intes a Sa npa ol o SpA
D. Cors i ni
3/Feb/17 2/Feb/17
56.0 54.0
59.0 54.0
65.0 54.0
65.0 55.0
Ci ti group Inc Pres ti ge Economi cs LLC
E. Mors e J. Schenker
31/Ja n/17
50.0
54.0
60.0
65.0
30/Ja n/17
56.0
59.5
62.0
65.0
Proms vya zba nk PJSC Ita u Uni ba nco Hol di ng SA
S. Na rkevi ch A. Pa s s os
30/Ja n/17 25/Ja n/17
53.4 55.9
54.7 55.3
55.9 54.8
54.7 54.2
BNP Pa ri ba s SA
H. Tchi l i ngui ri a n
25/Ja n/17
54.0
57.0
59.0
62.0
HSH Nordba nk AG Emi ra tes NBD PJSC
J. Edel ma nn E. Bel l
25/Ja n/17 18/Ja n/17
53.0 52.0
51.0 55.0
49.0 55.0
47.0 60.0
ABN AMRO Ba nk NV Wel l s Fa rgo Securi ti es LLC
H. Va n Cl eef R. Rea d
12/Ja n/17 11/Ja n/17
50.0 55.5
50.0 61.0
55.0 60.0
55.0 58.0
Nordea Ba nk Norge ASA Ma rket Ri s k Advi s ory Co Ltd
T. Sa l tvedt N. Ni i mura
10/Ja n/17 6/Ja n/17
53.0 54.0
56.0 54.0
58.0 56.0
59.0 59.0
DZ Ba nk AG Deuts che Zentra l -Genos s ens cha fts ba nk
A. Herl i ngha us
4/Ja n/17
53.0
54.0
55.0
58.0
Sa nta nder UK PLC Norddeuts che La ndes ba nk Gi rozentra l e
J. Kenney F. Kunze
4/Ja n/17 4/Ja n/17
54.0 55.0
50.5 54.0
52.0 60.0
53.5 60.0
Soci ete Genera l e SA Ra i ffei s en Ba nk Interna ti ona l AG
M. Wi ttner H. Loa cker
20/Dec/16 20/Dec/16
52.5 54.0
55.0 58.0
57.5 61.0
60.0 60.0
Schnei der El ectri c SE Reel Ka pi ta l Menkul Degerl er AS
K. Li u E. Erka n
19/Dec/16 16/Dec/16
53.0 55.0
57.1 56.0
55.7 56.0
52.1 58.0
RBC Ca pi ta l Ma rkets
G. Pa rdy
15/Dec/16
55.6
57.1
59.1
60.6
Ba rcl a ys PLC Ba nk of Nova Scoti a /The
M. Cohen M. Loewen
15/Dec/16 14/Dec/16
57.0 58.0
62.0 60.0
56.0 60.0
53.0 62.0
La ndes ba nk Ba den-Wuerttemberg Uni Credi t Ba nk AG
F. Kl umpp J. Hi tzfel d
12/Dec/16
55.0 52.0
55.0 55.0
55.0 59.0
60.0 60.0
Overs ea -Chi nes e Ba nki ng Corp Ltd NE Nomi s ma Energi a Srl
B. Ga n M. Ma zzoni
6/Dec/16 30/Nov/16
57.5
60.0 49.1
62.5 51.0
65.0
46.9
Fl exi hedge Ltd
J. Mi l l er
24/Oct/16
50.0
52.0
54.0
56.0
MPS Ca pi ta l Servi ces Ba nca per l e Impres e SpA Da ns ke Ba nk A/S
M. Porci a tti J. Peders en
17/Oct/16
52.0
4/Oct/16
52.0
55.0 54.0
60.0 56.0
58.0 58.0
Sta nda rd Cha rtered Ba nk Ri s i ng Gl ory Fi na nce Ltd
P. Hors nel l E. La s hi ns ki
29/Sep/16 21/Sep/16
57.0 43.0
63.0 36.0
66.0 31.0
68.0 41.0
Toronto-Domi ni on Ba nk/Toronto Incrementum AG
B. Mel ek
19/Sep/16 26/Aug/16
59.0 62.0
61.0
R. Stoeferl e
65.0
61.0 72.0
62.0 73.0
Jefferi es LLC
J. Ga mmel
C. Pa ra s keva s
9/Dec/16
52.7
23/Aug/16
53.0
56.0
59.0
63.0
Aus tra l i a & New Zea l a nd Ba nki ng Group Ltd/Mel bourne D. Hynes Ba nk of Ameri ca Merri l l Lynch F. Bl a nch
19/Aug/16 17/Aug/16
53.0
60.0 59.0
58.0 66.0
59.0 64.0
DNB ASA Evercore Pa rtners Inc
T. Kjus C. Zha o
17/Aug/16 16/Aug/16
60.0 45.0
65.0 50.0
65.0 50.0
70.0 55.0
ING Ba nk NV
H. Kha n
9/Aug/16
35.0
40.0
45.0
45.0
Median Mean
54.0 53.8
55.2 55.6
57.3 57.2
59.0 58.5
High Low
62.0 43.0
65.0 36.0
72.0 31.0
73.0 41.0
Current Fwd
56.3
57.5
57.7
57.5
Difference (Median - Current)
-2.3
-2.4
-0.4
1.5
55.0
Source: Bloomberg
Oil Market Monthly Report
6
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Outperform: Target Price represents expected returns >= 10% in the next 12 months
Neutral: Target Price represents expected returns between -10% and +10% in the next 12 months
Underperform: Target Price represents an expected return of
